Growing Cannabis Sector Sees Surge in Acquisitions

CannabisNewsWire Editorial Coverage: The ongoing growth of the cannabis sector is now driving a surge in acquisitions, as companies compete to control a burgeoning market.

The cannabis sector has seen incredible growth, reaching $10 billion this year in the United States alone.
This has led to a wave of mergers and acquisitions, as companies strengthen their positions.
This pattern is accompanied by expansion into new markets and investment in smaller companies by their larger cousins.

Hydroponic supplier Sugarmade, Inc. (OTCQB: SGMD) (SGMD Profile) is in the process of acquiring two hydroponic companies, improving its already strong position as a provider of vital cultivation equipment. Industry leader Aphria, Inc. (OTCQB: APHQF) is making acquisitions in Jamaica, Latin America, and Canada, with the latter giving it access to European markets. Cannabis outsider Constellation Brands, Inc. (NYSE: STZ) has invested heavily in cannabis grower Canopy Growth, with an eye to creating cannabis-infused beverages. In Florida, MedMen Enterprises, Inc. (OTCQB: MMNFF) has acquired cultivation and retail assets, expanding its reach from three to four states. And Emerald Health Therapeutics (OTCQX: EMHTF) is set to acquire the remaining shares of Northern Vine Canada Inc., in a move that gives Emerald full ownership of Northern Vine.

To view an infographic of this editorial, click here.

Acquisitions Heating Up in the Cannabis Sector

For a new sector of the economy, the cannabis industry has grown at a fantastic rate. In the relatively few years since medical cannabis started to be legalized in North America, a multimillion-dollar industry has evolved, covering cultivators, retailers, marketing and all the support services the industry needs. The recent legalization of recreational cannabis in several U.S. states and Canada, together with the growing popularity of medical cannabis, is propelling the industry’s value into the billions.

Initially, growth was mostly driven by the creation of new companies or subsidiaries of pharmaceutical firms, as they set up new businesses in a new economic space. But in recent years, that has changed. Larger cannabis companies have started taking over smaller rivals and companies serving different parts of the market. Acquisitions are on the rise.

Consolidation in a Growing Sector

The cannabis sector is made up of a wide range of companies, from those focused on cultivation to the likes of Sugarmade, Inc. (OTCQB: SGMD), a hydroponics supply company that is making a move into the broader cannabis space.

The appearance of this range of companies has been made possible by the phenomenal growth of the market. The cannabis market in the United States is expected to be worth over $10 billion this year, 50 percent larger than it was in 2016, and that growth shows no sign of slowing. With an estimated $46 billion worth of business still existing outside legal markets, there’s vast scope for expansion as legalization spreads and consumers are drawn away from black market dealers. And that’s only in the United States, never mind the rest of the world.

As faith in the industry grows, investors are pouring in additional funding, leading to a boom in mergers and acquisitions. Some early players are cashing out, making the most of their companies’ growth to make a healthy profit and move on to something new. Others are taking over these smaller businesses, creating businesses with greater economic clout and more vertical integration.

This led to 145 mergers and acquisitions in the sector in the first half of 2018, compared with only 79 during the same period a year before. Some of these have made big news, with Aphria investing $200 million acquisitions in Latin America and Jamaica while drinks company Constellation Brands acquired a third of the equity in Canopy Growth. This shift creates even more opportunities for companies sticking in the sector, such as Sugarmade.

Acquisitions Big and Small

Based in California, Sugarmade has immediate access to one of the world’s largest legal cannabis markets and is making the most of that. One of the largest publicly traded hydroponic supply companies, its growth has been fueled by the vital role hydroponic equipment plays in the cultivation of cannabis.

Much cannabis cultivation takes place indoors, using sophisticated specialist equipment produced by companies such as Sugarmade. This gives producers greater control over growing conditions, encourages more successful crops, allows year-round production and makes it easier to secure this valuable crop.

Already a significant supplier of hydroponics, Sugarmade looks set to consolidate its position through the recently announced acquisition of two companies selling hydroponic and other cultivation supplies. This could make a huge difference to the company’s financial fortunes. Its projected revenues for 2019, previously set at $30 million, could exceed $75 million if these deals go through, more than doubling the company’s revenues.

“The hydroponic supply sector is still highly fragmented with many of the larger players not likely to reach public company liquidity events for the original entrepreneurial teams,” said Jimmy Chan, CEO of Sugarmade. “We have entered into talks with at least two of these companies for acquisition, which we believe will be highly accretive for common Sugarmade shareholders and additive to our already robust top line growth rate. We wanted to publicly disclose these discussions to ensure that all shareholders have equal access to our direction, thus our recent public filing.”

The company has set a special shareholder meeting October 10, creating an opportunity to establish more shares in the company and discuss the acquisitions. In a fast-growing sector such as cannabis, there’s little time for delay.

Investing in Others

Sugarmade’s success is largely driven by reaching new markets and supporting other companies, maximizing its potential for growth. Though U.S. based, the company has also begun expansion into the European market through online sales into the United Kingdom. Even in countries without a legal cannabis market, it is possible for hydroponics companies to sell their wares to people growing other specialist plants. And with cannabis legalization spreading globally, this allows companies such as Sugarmade to firmly establish their positions before a new market emerges.

The company is expanding its presence within the North American cannabis market by investing in industrial hemp and cannabidiol (CBD). Industrial hemp, a form of cannabis without the high, can be used for a wide range of purposes and looks set to be widely grown in the United States following the passage of the 2018 Farm Bill.

CBD, which can be derived from industrial hemp, is a chemical whose beneficial properties are only just starting to be understood and which is used in a growing range of health and wellness products. Sugarmade is investing $1 million Hempistry, Inc., a Nevada hemp company. This is expected to provide access to Hempistry shares as well as a supply agreement between the two companies.

Other businesses are also working to expand within the sector.

Aphria, Inc. (OTCQB: APHQF), one of the most successful companies in the cannabis sector, is undertaking acquisitions that will extend its reach beyond North America. In July, it announced acquisitions in Argentina, Colombia, and Jamaica worth around $200 million. Acquired through sister company Scythian Biosciences Corp., these will give Aphria reach into markets outside the United States and Canada. The company also expanded its international reach through the acquisition of Canadian company Nuuvera, which has supply and sales agreements with companies in Germany, Italy, Spain, Malta, the United Kingdom, Israel and Uruguay.

Drinks manufacturer Constellation Brands, Inc. (NYSE: STZ) is best known for beverages such as Corona, but it has recently made some surprising choices. The company has invested heavily in Canadian company Canopy Growth, moving into the cannabis market. Constellation’s approach isn’t about selling cannabis but about creating cannabis-infused drinks. These beverages are due to become legal in Canada next year. By creating a bridge between beverage manufacturers and cannabis growers, Constellation could be the first to establish widely recognized cannabis drink brands.

Cannabis manufacturer and retailer MedMen Enterprises, Inc. (OTCQB: MMNFF) shows what can be achieved by combining different elements in the cannabis supply chain. The company sees the product through from cultivation to customers’ hands, all under a carefully managed brand. This summer, it acquired dispensary and cultivation assets from Treadwell Simpson Partnership and affiliates, adding facilities in Florida to those it already owned in California, Nevada, and New York.

Emerald Health Therapeutics (OTCQX: EMHTF) owns Agro-Biotech, a licensed cannabis grower with a 75,000-square-foot indoor facility and plans to add a 500,000-square foot greeQnhouse. The company also owns 50 percent of Pure SunFarms, which is converting a licensed existing 1.1 million-square-foot greenhouse into a full-production commercial resource.

The cannabis sector has matured in recent years. As it grows within the United States and beyond, acquisitions are allowing companies to expand their options and strengthen their position in a powerful new industry.

For more information on Sugarmade, visit Sugarmade, Inc. (OTCQB: SGMD)

About CannabisNewsWire

CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today’s market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.

Receive Text Alerts from CannabisNewsWire: Text “Cannabis” to 21000

For more information please visit https://www.CannabisNewsWire.com and or https://CannabisNewsWire.News

Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: http://CNW.fm/Disclaimer

CannabisNewsWire (CNW)
Denver, Colorado
www.CannabisNewsWire.com
303.498.7722 Office
Editor@CannabisNewsWire.net

DISCLAIMER: CannabisNewsWire (CNW) is the source of the Article and content set forth above. References to any issuer other than the profiled issuer are intended solely to identify industry participants and do not constitute an endorsement of any issuer and do not constitute a comparison to the profiled issuer. The commentary, views and opinions expressed in this release by CNW are solely those of CNW. Readers of this Article and content agree that they cannot and will not seek to hold liable CNW for any investment decisions by their readers or subscribers. CNW is a news dissemination and financial marketing solutions provider and is NOT registered broker-dealers/analysts/investment advisers, hold no investment licenses and may NOT sell, offer to sell or offer to buy any security.

The Article and content related to the profiled company represent the personal and subjective views of the Author, and are subject to change at any time without notice. The information provided in the Article and the content has been obtained from sources which the Author believes to be reliable. However, the Author has not independently verified or otherwise investigated all such information. None of the Author, CNW, or any of their respective affiliates, guarantee the accuracy or completeness of any such information. This Article and content are not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action; readers are strongly urged to speak with their own investment advisor and review all of the profiled issuer’s filings made with the Securities and Exchange Commission before making any investment decisions and should understand the risks associated with an investment in the profiled issuer’s securities, including, but not limited to, the complete loss of your investment.

CNW HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.

This release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” describe future expectations, plans, results, or strategies and are generally preceded by words such as “may”, “future”, “plan” or “planned”, “will” or “should”, “expected,” “anticipates”, “draft”, “eventually” or “projected”. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a company’s annual report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements. The forward-looking statements in this release are made as of the date hereof and CNW undertakes no obligation to update such statements.

Hydroponic Hardware Key to Tapping Long-Term Profits of Burgeoning Cannabis Market

CannabisNewsWire Editorial Coverage: The North American cannabis market continues to accelerate as Canada rockets towards the October 17 deadline for the nationwide legalization of recreational marijuana.

Hydroponic market trying to keep up with booming cannabis market set to exceed $25 billion by 2021.
Continued expansion of cannabis cultivation and demand for controllable production parameters are a boon to hydroponics industry.
Healthcare sector increasing demand for CBD from sources such as industrial hemp.
Regulatory reform throughout North America and Europe driving change in overall space.

The milestone legislation appears set to open the door wider for companies pursuing a position in the promising sector, including those consolidating vectors within the still highly fragmented hydroponics supply sector. The global hydroponic market alone was worth nearly $3.5 billion last year and is set to break $10 billion by 2023, maintaining a healthy 18.2 percent CAGR. Recently projected revenue growth to more than $30 million next year illustrates the lofty aspirations of hydroponics supplier Sugarmade, Inc. (OTC: SGMD) (SGMD Profile), a company that recently reported a sequential revenue increase of some 215 percent and a year-over-year revenue increase of approximately 228 percent for revenues of just under $3 million in the most recent quarter. Scotts Miracle-Gro Company (NYSE: SMG) is another one to watch in this space, with an already well-established presence and the recent announcement that the company will acquire general hydroponics equipment supplier Sunlight Supply, Inc., for $450 million. An acquisition may also benefit Aurora Cannabis, Inc. (OTC: ACBFF), which recently announced its procurement of MedReleaf. The huge announcement of an additional $4 billion investment in researcher, cultivator and seller of extracts/flowers Tilray, Inc. (NASDAQ: TLRY), by beer giant Constellation Brands, Inc., has been unmistakable “handwriting on the wall” to many investors that the cannabis industry is here to stay. And Canopy Growth Corporation (NYSE: CGC) has also been bitten by the sector consolidation bug, as evidenced by the company’s recent snapping up of premium cannabis lifestyle brand Hiku Brands Company Ltd.

To view an infographic of this editorial, click here.

Hydroponic Picks and Shovels

With the North American Marijuana Index up 33 percent over the last month and up nearly 550 percent over the last three years, it appears that this could be the front end of an ongoing boom that may have yet to even see its true heyday — something that could be triggered by the adoption of more widespread legislative reforms across several U.S. states, occurring in ways similar to California’s cannabis reforms.

It is a well-known investing adage that those who developed long-term success during California’s gold rush made their money not from mining claims but from selling the necessary accoutrements miners needed, such as picks and shovels. The same phenomenology holds true today during the ongoing green rush, with hardware manufacturers and suppliers of grow systems poised to reap the rich, long-term rewards of an industry that is still just getting off the ground in many respects. Leading cannabis sector analysts at ArcView recently detailed how the North American market saw sales growth of 33 percent last year and projected that the market will reach $25 billion a year by 2021, maintaining a CAGR of 28 percent.

Cannabis prohibition will most likely come to an end in the United States, just as it has in Canada, echoing what previously occurred with the end of alcohol prohibition. To many analysts in the sector today, the legalization question is not if but when. Savvy investors seem to understand the naked reality that humans have been consuming cannabis for likely well over ten thousand years, stretching back to the apparently widespread consumption of seeds and oils in China, where the first recorded medical uses of the plant occurred almost five thousand years ago. Little wonder that the cannabidiol (CBD) market is growing by leaps and bounds, as the infusion of CBD into healthcare products becomes more prevalent. The Brightfield Group recently projected faster-than-anticipated growth for the CBD market, with sales projected to reach $22 billion or more by 2022.

A Rollup Strategy in Hydro Hardware

Product and brand marketing outfit Sugarmade, Inc. (OTC: SGMD), whose brands include ZenHydro.com, CarryOutSupplies.com and BudLife Cannabis Storage Solutions, is currently focused on increasing revenues by repeating the success of the company’s past strategic moves, such as last year’s master market agreement with BizRight Hydroponics, a highly successful and rapidly growing manufacturer and distributor of intelligently designed hardware geared specifically for the needs of the cannabis cultivation sector. The company recently revealed that, as part of a growing emphasis on exploiting a “picks and shovels” rollup approach to the burgeoning cannabis sector, Sugarmade is in acquisition talks with multiple hydroponic supply companies having parallel competencies.

Sugarmade CEO Jimmy Chan explained in a recent shareholder Q&A that targeting home growers as well as smaller, profitable companies in the sector — companies that already have exceptional hardware offerings for professional cannabis processors and cultivators — is something that looks to be highly accretive. The strategy is quite simple, because while there is an explosion of new cannabis ventures in the market, few of these pioneering entrepreneurs of profitable operations possess access to public markets or equity-financed capital.

Branching Out into CBD and Industrial Hemp

Sugarmade’s revenue generation plan isn’t limited to relying on expanding North American markets either. The company was obviously happy to announce expansion into the European hydroponics supply market recently, through a sizeable order via Amazon UK. This announcement comes amid an ongoing shift for the company from a majority of hydroponic-related revenue growth occurring in California and other West Coast markets to more geographically dispersed growth throughout other U.S. states that are also seeing regulatory easing.

In addition, Sugarmade announced in late August that the company has committed to investing $1 million over the next 12 months in Hempistry, Inc., the privately held cultivator of an ultra-high CBD strain of industrial hemp (less than 0.3 percent THC), which has reserved 23,000 acres of prime Kentucky farmland for the task. Moreover, Chan has been made an advisor of Hempistry, and the company’s investment will be in the form of common shares, positioning SGMD shareholders quite well should a Hempistry IPO ever come to the fore. A cultivation supply agreement signed between the two companies is the icing on the cake and demonstrates to investors how such a rollup strategy also represents additive revenue growth that will magnify Sugarmade’s already robust top-line growth rate.

Sugarmade is already in formal acquisition negotiations with at least two companies in online and retail hydroponics, as well as other agricultural cultivation supplies, and the company has made a special filing with the SEC to formally address these acquisitive ambitions. Together with the industrial hemp and CBD initiative engaged in via the Hempistry investment, SGMD’s management team feels that shareholders are now well-positioned for considerable upside, as the company skillfully manages its aggressively planned growth rate and hones its focus more toward cultivation-related revenue sources.

Cannabis-Related Hydroponics — A Tricky Market

The retail market for hydroponics, generated by cannabis growers who are often highly knowledgeable about different types of grow equipment, is expected to become an increasingly contested arena in the coming years. For a disruption-minded brand marketing company such as Sugarmade, which is now one of the biggest publicly traded companies in cannabis-related hydroponics, the need to speak directly to consumers in a language they understand is readily apparent. The BizRight deal speaks volumes, given that BizRight has developed an impressive rapport with customers and partners over the last seven years, becoming one of the most trusted names today in world-class hydroponics.

Scotts Miracle-Gro Company (NYSE: SMG) had a strong quarter recently, with consumer purchases up 5.4 percent amid continued strength of the company’s core consumer lawn and garden products. The aforementioned acquisition of Sunlight Supply will reportedly bring the company’s Hawthorne Gardening segment up to an estimated $600 million a year in total sales, giving the company an impressive footprint across the general hydroponics supply market.

Aurora Cannabis, Inc. (OTC: ACBFF) is one of the biggest and fastest growing cannabis companies in the game today, with a currently funded capacity of nearly 950,000 pounds of product per year and an annual production target over 1.256 million pounds post-acquisition of Ontario-based MedReleaf. With a production footprint spanning nine Canadian and two European production facilities, Aurora is one of the most enviably positioned cultivators in the industry and has the scale necessary to ensure low production costs as well as consistently high yields. The MedReleaf acquisition brings even more high-yield cultivation technology firepower to the table.

Tilray, Inc. (NASDAQ: TLRY), which is focused on research, cultivation, production and distribution of medical cannabis and cannabinoids, has seen some impressive share price appreciation since the company’s IPO in July. The announcement in September that the company was granted DEA approval to import a cannabinoid study drug to the United States from Canada for use in a neurological movement disorder (essential tremor) study has really attracted a lot of investors to the company’s unique offerings and global reach. Tilray’s sophisticated array of full-spectrum and highly purified extracts deserves a second look from investors who may just be caught up in the hype and do not fully appreciate the company’s portfolio and value proposition.

Canopy Growth Corporation (NYSE: CGC) is riding high on a huge capital injection from Constellation Brands, which controls approximately 38 percent of the company post-expansion of this important strategic partnership, which has also served as something of a watershed moment for the cannabis industry. Canopy is wasting no time when it comes to exploiting this new muscle, recently announcing a multiyear supply and service agreement with Centric Health Corp. Canopy also recently announced that its Tweed Farms subsidiary received license amendments approving all remaining greenhouse space at its primary site, expanding Canopy’s total licensed grow footprint to an impressive 3.2 million square feet.

Lean, Mean, Green Machine

Sugarmade has put together a straightforward revenue growth strategy that has been tried and tested in other markets. Successfully executing a rollup strategy in the highly fragmented hydroponics space will come down to the company’s ability to continue picking superb targets that will be genuinely accretive to shareholder value over the longer term and directly additive to the company’s already impressive top-line growth. The Hempistry investment, as well as further expansion into hydroponics supply, is a win-win for both target companies and investors alike.

For more information on Sugarmade, visit Sugarmade, Inc. (OTC: SGMD)

About CannabisNewsWire

Receive Text Alerts from CannabisNewsWire: Text “Cannabis” to 21000

For more information please visit https://www.CannabisNewsWire.com and or https://CannabisNewsWire.News

Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: http://CNW.fm/Disclaimer

CannabisNewsWire (CNW)
Denver, Colorado
www.CannabisNewsWire.com
303.498.7722 Office
Editor@CannabisNewsWire.net

CNW HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.

420 with CNW – Utah Set to Vote on Legalization of Medical Cannabis

Voters in Utah are set to vote on a bill (Proposition 2) that would legalize access to medical cannabis. The polls are slated for November 6, 2018.

Prop 2 is unique from other mid-term issues to be voted upon because it originated from voters themselves rather than from their elected leaders. Over 113,000 voter signatures were collected in order to get this matter on the ballot.

Under the proposed law, individuals with a health condition that meets the requirements stated in the Act can get a recommendation from a doctor. That recommendation can then be used to apply for a medical marijuana card which will be used to purchase cannabis at licensed dispensaries.

HIV/AIDS, cancer, multiple sclerosis, chronic pain and post-traumatic stress disorder (PTSD) are some of the diseases/conditions that qualify for treatment using medical cannabis.

Several opinion polls show that Prop 2 enjoys massive public support, so it stands a high chance of being voted into law early next month.

However, the strong opposition to Proposition 2 cannot be ignored. For example, the Governor has been open about his opposition to the Act. Law enforcement agencies are also against this law.

The Mormon Church has also voiced its concerns about the proposed law. The church insists that the law should not be passed in its present form because it doesn’t contain enough safeguards to prevent medical cannabis from being abused.

For example, one provision in the law grants patients permission to grow up to six cannabis plants for their own use in case such patients cannot find a licensed dispensary within a radius of 100 miles from their residence. How will such cannabis be monitored to ensure that it is used for the right purpose and in the right way?

The Utah Medical Association also opposes the Utah Medical Cannabis Act (Prop 2). They feel that medical cannabis isn’t being treated like the drug it is intended to be. For instance, medicines should be controlled in terms of dosage. The proposed law only sets a limit on how much cannabis a patient may buy within a 14-day period. Who is to stop such a patient from consuming all that cannabis within a few days before waiting for the fortnight to elapse in order to be eligible to buy more?

The rest of the country is watching and waiting to see if Utah will become state number 32 on the list of U.S states where medical cannabis is legal. Youngevity International, Inc. (NASDAQ: YGYI) and Sugarmade, Inc. (OTC: SGMD) must be taking notes as these developments unfold.

More from CannabisNewsWire

About CannabisNewsWire

CannabisNewsWire (CNW) is an information service that provides (1) access to our news aggregation and syndication servers, (2) CannabisNewsBreaks that summarize corporate news and information, (3) enhanced press release services, (4) social media distribution and optimization services, and (5) a full array of corporate communication solutions. As a multifaceted financial news and content distribution company with an extensive team of contributing journalists and writers, CNW is uniquely positioned to best serve private and public companies that desire to reach a wide audience of investors, consumers, journalists and the general public. CNW has an ever-growing distribution network of more than 5,000 key syndication outlets across the country. By cutting through the overload of information in today’s market, CNW brings its clients unparalleled visibility, recognition and brand awareness. CNW is where news, content and information converge.

To receive instant SMS alerts, text CANNABIS to 21000

For more information please visit https://www.CannabisNewsWire.com

Please see full terms of use and disclaimers on the CannabisNewsWire website applicable to all content provided by CNW, wherever published or re-published: http://CNW.fm/Disclaimer

CannabisNewsWire (CNW)
Denver, Colorado
www.CannabisNewsWire.com
303.498.7722 Office
Editor@CannabisNewsWire.net